2008 Annual Review - National Auto Auction Association

National Auto Auction Association
2008 Annual Review
Trust NAAA Auctions
National Auto Auction Association
Officers
Bob McConkey, Jr.
President
DAA Northwest
Dave Angelicchio
President-Elect
Pittsburgh Independent Auto Auction
Jay Cadigan
Vice President
Manheim
Mike Broe
Treasurer
Manheim
Warren Byrd
Secretary
ADESA Corporation
John Rea
Chairman of the Board
Rea Brothers’ Mid-South Auto Auction
Warren Young, Sr.
President-Emeritus
Frank Hackett
Executive Director
Charles R. Stepter, Jr.
General Counsel
Directors
Bonnie Benner
Manheim Metro Dallas
John Blobner
Manheim
Jay Fahrendorff
ADESA Minneapolis
Jerry Hinton
Brasher’s Cascade Auto Auction
Ellie Johnson
Manheim North Carolina
Austin McBride
Manheim New York
Charlotte Pyle
Capital City Auto Auction
Robert Sullivan
Dave Taylor
ADESA Syracuse
Dave Wescott
Acadia Auto Auction
Dennis Worthy
2
Manheim Metro Milwaukee
Table of Contents
Introduction
3
Overview & Highlights
4
Units Entered and Sold
5
Units Sold
5
Auction Units Sold by Source
6
Average Sales Price
7
Gross Value of Vehicles Sold
7
Average Number of Auction Held
8
Average Sales Price – Internet Auctions
8
Source of Used Inventory for Franchised Dealers
9
Where Dealers Buy and Sell Vehicles Wholesale
9
Real Gross Domestic Product
10
Housing Starts & House Price Change
10
Employment Growth and Unemployment Rate
11
New Vehicle Retail Sales
11
Used Vehicle Retail Sales
12
New Lease Originations & Off-Lease Volume
12
New Vehicle Retail Sales
13
Gasoline Price
13
Trust NAAA Auctions
14
NAAA North American Member Auctions
15
NAAA Contact Information
Back Cover
2008 Annual Review
Although the auto auction industry wasn’t completely immune from the financial
flu that laid low the economy last year, its vital signs remain healthy, demonstrating
the strength and depth of a mature industry that despite various challenges over
its seven decades has proven its resiliency.
The National Auto Auction Association reported $83.1 billion in sales of used
vehicles, totaling 9.48 million units, at its member auctions for 2008. The
number of units entered jumped 7% to 17.1 million.
Fleet/lease and repo vehicles represented the largest number of units sold at
42.8%, followed by dealer-consigned vehicles (42.0%), factory vehicles (12.7%)
and just 2.5% from other sources.
Bob McConkey, Jr.
President
Of course, given the financial crisis that began infecting the nation in December
2007 and spread into a global recession last year, the slight dip of 6.4% in the
gross value of units sold was not unexpected. But 2008 is only the second time in
a dozen years the industry has experienced any decline at all.
Meanwhile the wholesale auction industry continues its trend toward full-service
auction facilities. A substantial 98% of the 318 North American auctions offer
detail shops, 86% body repair and paint shops, and 99% transportation services
(either in-house or sublet). Most provide some level of mechanical services (94%)
and dealer financing (95%).
The average NAAA auction member operates a 7-lane facility on 74 acres, employs
141 people with a payroll of $3.1 million, and contributes $26,750 annually
to charity.
Frank Hackett
Executive Director
So even with the country suffering from an ailing economy, our annual check up
shows the industry to be fundamentally fit — our business model remains sound
and our services continue to be crucial to our loyal customers.
It’s worth remembering our industry sprang from the entrepreneurial spirit
meeting a consumer need in the Great Depression, and has survived 10 recessions
in its lifetime. By coming together and displaying that same ingenuity, we’ll not
only survive this trying time, we will become healthier and grow stronger for a
brighter future.
Dr. Ira Silver, Ph.D.
Economist
3
Overview & Highlights
In 2008, the 318 National Auto Auction Association’s North American member
auctions sold 9.48 million vehicles with a gross value of $83.1 billion, according to
the association’s 12th Annual Survey.
“While somewhat down from 2007, the numbers show the ability of the industry
to continue performing its service to buyers and sellers of used vehicles, even
during an economic recession,” according to NAAA President Bob McConkey, Jr.
McConkey added that “although difficult economic and auto industry conditions
create many challenges to the auction industry, they provide opportunities for the
more efficient and innovative auctions to create platforms that will be even more
profitable when industry conditions improve.”
A record 17.1 million vehicles
entered the auction channel
9.48 million vehicles sold for
$83.071 billion
Average auction has 74 acres
and 141 employees
Seventy-eight percent of the North American member auctions
responded to the survey last year. The association’s auctions moved
17.1 million vehicles through their lanes with a sales rate of
55.4% representing more than 9.48 million vehicles sold.
The average NAAA member auction covers 74 acres, has 141
full- and part-time employees and operates seven lanes. The
largest auction has 34 lanes, while the smallest has just one lane.
NAAA North American member auctions offer detail services
910,000 vehicles valued at
(98%) and transportation services (99%), either in-house
$12.8 billion sold via Internet
or contracted; body and paint repair (86%), and some level
based sources
of mechanical services (94%). Ninety-five percent of member
auctions offer financing for automotive retailers, and sixty-eight
percent offer in-house dealer finance programs.
Internet-based sales, both cyber auctions and simulcast sales as part of physical
sales, have shown continued growth. Combined with the ease and growing
availability, the average price per unit sold by simulcasting and cyber auctions
was $14,066. In 2008, Internet auctions reported sales of 910,000 vehicles, representing $12.8 billion.
4
A record 17.1 million vehicles entered the auction channel in 2008.
A decline in the conversion rate
resulted in a small decline in the
number of vehicles sold by NAAA
member auctions. Compared to the
sharp drop-off in vehicle sales at the
retail level the decline in auction
sales was very mild. This comparative
stability reflects the pricing flexibility
and the varied sources of supply that
are integral to the auction channel.
Units Entered & Sold
Millions
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Source: NAAA Survey
Although the number of vehicles
sold at auctions declined 0.6% to
9.48 million in 2008, auction volume
held up well considering the collapse
at retail where new units were down
18.4% and used retail down 11.8%.
Units Sold
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Source: NAAA Survey
Raymond C. Nichols
NAAA Hall of Fame
Inducted into the NAAA Hall of Fame in 2008, Ray Nichols has devotedly served as the 2002 NAAA President,
President of NAAA Services Corporation, and is the Chairman / CEO of BSC America Companies. He spent 17 years
during the first part of his career as a commercial banker, and managed several hundred million-dollar portfolios.
He has been president or chair of various committees and boards, such as: NAAASC/NADASC Joint Marketing
Committee, Maryland Auctioneers Association, Baltimore City Auction Board, and Maryland Bankers Association.
NAAA Hall of Fame
Induction into the NAAA Hall of Fame is awarded to someone with long-term service to the wholesale motor
vehicle auction industry and NAAA, who has improved the industry as a whole, has worked with other NAAA
members to improve the industry as a whole and has consistently followed the high standards of the NAAA
Code of Ethics.
5
Auction Units Sold by Source
Percent Change - 2008
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Total auction volume is less related
to current economic conditions than
retail sales. While dealer consignment closely follows retail unit sales,
the number of fleet and off-lease
vehicles offered and sold at auction is dependent on the number
of units going in fleets and leases
over the past few years. In addition,
repossessions pick up as economic
conditions deteriorate and retail unit
sales decline. This varied sourcing
increase the stability of the auction
industry and helps it weather difficult economic conditions.
Source: NAAA Survey
Auction Units Sold by Source
Percent
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In 2008, the collapse of retail
auto sales reduced the amount of
trade-ins that dealers needed to sell
through the auction channel and
resulted in a sharp drop in the dealer
consignment share of total auction
volume to 42% from 50% in 2007.
Off-lease, fleet, and repossessions
made up for most of the dealer
shortfall and saw an increase in
share from 35.3% in 2007 to 42.8%
in 2008.
"̅iSource: NAAA Survey
Steve Houston
NAAA Hall of Fame
Steve Houston is Vice President at Wachovia Financial of Remarketing. He has actively served on many NAAA
committees, and is the past president and one of the founding members of IARA.
As a low-key and well-respected leader, Steve Houston has been in the automotive business since 1975 and has
been associated with 15 automotive dealerships and remarketing companies.
6
NAAA Hall of Fame
Induction into the NAAA Hall of Fame is awarded to someone with long-term service to the wholesale motor
vehicle auction industry and NAAA, who has improved the industry as a whole, has worked with other NAAA
members to improve the industry as a whole and has consistently followed the high standards of the NAAA
Code of Ethics.
Auto auctions are close to a pure
market where shifts in demand are
quickly transmitted to price. In 2008,
the weakness in demand at the retail
channel led to a 5.9% decline in
average price to $8,762.
Average Sales Price
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Source: NAAA
Recession-driven lower volume and
prices in 2008 led to a decline in
gross value of vehicles sold to about
$83 billion. While below the inflated
levels of 2006 and 2007, the 2008
level is in line with earlier totals.
Gross Value of Vehicles Sold
Billions of Dollars
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Source: NAAA
Chet Goins
NAAA Industry Pioneer
Chet Goins founded Auto Dealer Exchange (ADE) Indianapolis in 1979. In just six years, Mr. Goins increased the
auction from five lanes to 10 lanes. Today, one of the country’s largest independently-owned auctions consigns
more than 100,000 automotive units a year.
Industry Pioneer Award
This award is given from time to time to persons who have worked in the wholesale motor vehicle industry
and/or NAAA and have innovated or improved methods of improving services to remarketers through NAAA
member auctions, who have championed NAAA member auctions as providing services for motor vehicle
remarketers unavailable from any other source, and who have consistently followed the high ethical standards
of the NAAA Code of Ethics.
7
Almost every day throughout North
America an NAAA auto auction takes
place. An ever-growing number of
consignors have found the auction
to be their best venue to remarket
vehicles.
Average Number of Auctions Held
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Source: NAAA
In 2008, 910,000 vehicles valued
at $12.8 billion were sold through
NAAA Internet-based sources. The
average sale price decreased 6.8%
over the previous year compared
to a 5.9% decline for all units sold
at auctions.
Average Sales Price - Internet & Simulcast Auctions
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Source: NAAA
Jim Hallett
NAAA Industry Pioneer
Jim Hallett is President and CEO of ADESA, overseeing 10,000 employeess and billions of dollars of revenue. Jim
worked for a retail car business after college and became a general manager of a large franchise dealership. After
10 years, he made a career change to the wholesale side of the business and “pioneered” an auction auction
known as Ottawa Auto Dealers Exchange. Three years later he started another auction in Halifax, Nova Scotia.
Within a few months both auctions merged with ADESA.
In 1996, Jim answered a call to take over the management of ADESA with 16 auctions, and today he leads the
company with 60 auctions, and hundreds of millions of dollars in earnings.
8
Franchise dealers sourced 33%
of their used vehicle inventory
from auto auctions in 2008
compared to 31% in 1998.
Source of Used Vehicle Inventory for Franchised Dealers
1998 vs. 2008
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Source: NADA
Source: NADA
According to NIADA’s 2008 Used
Car Industry Report, dealers
reported a slight increase in
vehicles bought and sold over
the previous year at wholesale
auto auctions. The information
presented on this chart is the
percentage of respondents who
use wholesale auctions, other
dealers and online/other.
Where Dealers Buy and Sell Vehicles Wholesale
Percentage of Respondents to NIADA Survey
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Source: NIADA Survey
Jimmy Rea
NAAA Industry Pioneer
In 1982, Jimmy Rea started a used car business, which resulted in the founding of Rea Brothers’ Mid-South Auto
Auction. He graduated from the Mendenhall School of Auctioneering. Jimmy Rea served as the NAAA Southern
Zone Auto Auction Association President, and through his auction career has been an active member on numerous
NAAA committees.
9
Real Gross Domestic Product
Economic growth as measured by
real gross domestic product (GDP)
slowed to a 1.1% gain in 2008 as the
economy went into a recession. The
drag from an extended decline in
house prices and housing construction spilled over to the financial and
banking markets and finally the
overall economy as credit became
very difficult to get for almost
all borrowers.
Percent Change
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Source: U.S. Dpartment of Commerce
Housing Starts & House Price Change
The economic weakness accelerated
throughout the year, with the fourth
quarter declining at more than a 6%
annual rate. The new administration
and Congress will add significant
stimulus this year to recent and
future Federal Reserve and Treasury
actions. However, it will take time to
turn the economy around and real
GDP will show a decline for 2009
as whole.
Thousands of Units & Percent Change
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Source: U.S. Dpartment of Commerce
10
Declines in housing starts and house
prices set records in 2008 as the
problems in the subprime mortgage
market spread to the financial markets
and finally to the general economy.
Lack of new construction and therefore, declining house inventories; falling house prices; and lower mortgage
rates will combine to ultimately stem
the drag from this sector.
What had appeared to be a slowdown in economic growth in 2007,
turned into a recession in 2008
with employment declining by 3.1
million. The unemployment rate
went up from 4.6% in 2007 to 5.8%
in 2008 and ended the year at 7.2%.
This environment is negative for the
automobile industry as people are
reluctant to make major purchases,
such as buying a car, while the labor
markets are deteriorating, even if
they are currently employed.
Employment Growth and Unemployment Rate
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Source: U.S. Dpartment of Labor
New retail motor vehicle sales faced
an almost perfect storm in 2008
as gasoline prices shot up above
$4/gallon and then when gas prices
dropped, credit and overall economic
conditions collapsed. In addition,
lack of fuel-efficient inventory limited sales in segments where demand
was relatively stronger in the first
half. In total, unit sales declined
18.4% in 2008 to 13.1 million units.
The year ended with sales in the 10
million unit range. Even with an
expected recovery in late 2009, on an
annual basis unit sales are likely to
decline from the 2008 level.
New Vehicle Retail Sales
Millions of Units & Percent Change
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Source: U.S. Dpartment of Commerce
11
Used Vehicle Retail Sales
Millions of Units & Percent Change
Used vehicle retail sales declined
11.8% to 36.5 million units in 2008
as high gas prices, very tight credit,
and a weakening labor market combined to sharply reduce demand for
used vehicles. The 2008 decline was
worse than in previous recessions
when not all of the critical demand
drivers were as negative.
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Source: CNW Marketing Research
New lease originations have
increased every year from 2004
through 2007. This has been and will
be reflected in increasing off-lease
volume through 2010.
New Lease Originations & Off-Lease Volume
Millions of Units
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Source: Manheim
Bill Lanier
NAAA Auctioneer of the Year
Retiring after 53 years of auctioneering, Bill Lanier has worked at both independent and chain auctions throughout
the Southeast. Bill worked the first General Motors Corp. factory sale in 1967. His first job was at the Bristol Auto
Auction in Bristol, Tenn. Over the years he “sang” at sales for Dansville, Windsor, Greensboro, High Point, Clanton,
Darlington, Tidewater and Statesville auto auctions. He worked the Statesville sale for 24 years, Aycock for 23 years and
High Point for 13 years. He also worked chains sales in Orlando and Lakeland, Fla.
Bernie Hart Memorial - Auctioneer of the Year
The Bernie Hart Memorial Auctioneer Award honors “the most visible person in the auction industry.”
The award is named after long-time NAAA Executive Director Bernie Hart of Lincoln, Nebraska , who
served the association for over 30 years before retiring in 1988.
12
In addition to the large decline in
total new vehicle sales, the mix saw
a drastic shift away from light trucks
to autos. The 48.7% share for light
trucks in 2008 was the lowest in a
decade. As gas prices collapsed at
year end the light truck share did
move back up to around 50%.
New Vehicle Retail Sales
Share of Total
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Source: U.S. Department of Commerce
Gasoline prices were a major factor
in the auto industry in 2008. Starting
the year out at about $3/gallon, not
far from the previous year’s level,
retail auto sales held up relatively
well. As gas price shot up to over four
dollars, light truck sales collapsed.
Declining gas prices in August led
to a pickup in truck sales. However,
credit problems and employment
declines began to accelerate and
total vehicle sales dropped sharply.
Gasoline Price
$/Gallon
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Source: U.S. Department of Energy
Colleen Fitzgerald
NAAA Exhibitor of the Year
Colleen Fitzgerald, general manager, at Auto Auction Shopper/Used Car News, was the recipient of the
National Auto Auction Association’s Marie Hingst Award, during the 60th Annual NAAA Convention,
Equipment & Service Exposition in Chicago.
Marie Hingst Award
The inaugural award was presented to Marie Hingst at the 2006 convention in Orlando, Fla., and was
named after Ms. Hingst for her dedication and commitment to the NAAA. The award is presented each
year at the NAAA annual convention.
13
NAAA
Auctions
“We live up to our agreements, have
the courage to speak the truth and
provide industry leadership. Trust binds
the association and ultimately builds
a stronger NAAA for the benefit of
our customers.”
Bob McConkey, Jr.
NAAA President 2008-2009
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15
North American Member Auctions
National Auto Auction Association
Special Thanks To
Manheim
ADESA
Independent Auto Auctions
National Auto Auction Association
5320 Spectrum Drive, Ste. D, Frederick, Md. 21703 - 301-696-0400 - www.naaa.com